Churchill Downs Inc. Reports Financial Results for the Quarter Ended September 30, 2024

Press release · 10/26 04:12
Churchill Downs Inc. Reports Financial Results for the Quarter Ended September 30, 2024

Churchill Downs Inc. Reports Financial Results for the Quarter Ended September 30, 2024

Churchill Downs Incorporated reported its financial results for the quarter ended September 30, 2024. The company’s net revenue increased 12% to $444.1 million, driven by growth in its racing and gaming segments. Net income rose 15% to $43.1 million, or $0.59 per diluted share, compared to the same period last year. The company’s racing segment revenue increased 14% to $244.1 million, driven by higher attendance and handle at its Churchill Downs and Arlington International Race Course properties. The gaming segment revenue grew 10% to $120.1 million, driven by increased gaming revenue at its casinos. The company’s balance sheet remained strong, with cash and cash equivalents of $143.1 million and total debt of $1.2 billion.

Overview of the Company’s Financial Performance

Churchill Downs Incorporated (CDI) is a diversified entertainment company that operates live and historical racing venues, the TwinSpires online wagering business, and regional casino gaming properties. The company reported strong financial results for the three and nine months ended September 30, 2024, with increases in net revenue, operating income, and Adjusted EBITDA compared to the same periods in 2023.

Revenue and Profit Trends

For the three months ended September 30, 2024, CDI’s net revenue increased by $56.0 million (9.8%) to $628.5 million, driven by growth across all three of the company’s reportable segments:

  • Live and Historical Racing revenue increased $26.9 million (12.0%) due to growth at the company’s Virginia and Kentucky HRM properties, as well as the opening of the new Rosie’s Emporia property.
  • TwinSpires revenue increased $6.3 million (5.6%) primarily due to the Exacta business.
  • Gaming revenue increased $25.4 million (10.4%) largely from the opening of the new Terre Haute Casino Resort.

For the nine months ended September 30, 2024, net revenue increased $209.6 million (11.0%) to $2.11 billion, again led by strong performance in the Live and Historical Racing (+$142.2 million or 16.8%), TwinSpires (+$44.9 million or 12.9%), and Gaming (+$43.5 million or 5.8%) segments.

Operating income for the three months ended September 30, 2024 increased $13.6 million (12.1%) to $125.9 million, while for the nine months it increased $124.4 million (27.2%) to $582.2 million. The increases were driven by higher revenue, partially offset by higher operating expenses related to the new properties and investments.

Adjusted EBITDA, a key non-GAAP performance metric for the company, increased $17.1 million (7.8%) to $235.3 million in Q3 2024 and $117.8 million (14.6%) to $922.6 million for the first nine months of 2024. The Adjusted EBITDA growth was led by the Live and Historical Racing and TwinSpires segments.

Strengths and Weaknesses

A key strength for CDI is the diversity of its business model, with revenue and profit contributions from live and historical racing, online wagering, and regional casino gaming. This diversification helps mitigate risks and volatility in any one segment. The company has also demonstrated the ability to successfully develop and open new properties, such as Rosie’s Emporia, Derby City Gaming Downtown, and the Terre Haute Casino Resort, which have contributed to the strong financial performance.

Another strength is the company’s iconic Kentucky Derby event, which had a record-breaking performance in 2024 and continues to be a key driver of the Live and Historical Racing segment. The TwinSpires online wagering business has also shown resilience and growth, benefiting from the Exacta acquisition and expansion of the company’s sports betting operations.

However, one potential weakness is the company’s exposure to regulatory risks, as evidenced by the ongoing legal challenge to the constitutionality of historical horse racing in Louisiana. An adverse ruling could have a significant impact on the company’s HRM operations in that state. Additionally, the company faces increasing competition in its regional gaming markets, which has pressured margins in that segment.

Outlook and Future Prospects

Looking ahead, CDI has several major capital projects underway that are expected to drive future growth, including the Starting Gate Pavilion and Courtyard at Churchill Downs Racetrack, The Rose Gaming Resort in Virginia, and the Owensboro Racing and Gaming facility in Kentucky. The company plans to invest $450-$550 million in these projects in 2024.

The company also continues to focus on expanding its TwinSpires sports betting and iGaming business through market access agreements and retail sportsbook operations. This segment represents an important growth opportunity as more states legalize and regulate online sports betting.

However, the company faces economic headwinds, including concerns about consumer spending, inflation, and rising interest rates. These macroeconomic factors could potentially impact attendance, wagering, and overall demand for the company’s entertainment and gaming offerings.

Additionally, the company will need to navigate any regulatory changes or legal challenges, such as the ongoing case in Louisiana, that could affect its historical racing and gaming operations. Successful management of these risks will be crucial for the company to maintain its strong financial performance going forward.

Overall, CDI appears well-positioned for continued growth, with a diversified business model, strong brands and assets, and a pipeline of strategic initiatives. However, the company will need to carefully monitor economic conditions and regulatory developments to address any challenges that arise.